This research project takes advantage of a capitated payment system being implemented in one catchment area of Oregon's mental health system. The objective of the capitated payment system is to minimize state hospital utilization by identified chronically mentally ill persons who are frequent users of Oregon's involuntary treatment program. Capitated payments will be for extra intensive community services. The proposed research will; (a) determine the expenditures associated with the services delivered to these clients; (b) develop and test alternative risk adjustment models which will allow payers and providers to estimate the expenditures to be incurred in a given time period by a given client: (c) evaluate an a priori risk adjustment model based on client disability: and (d) test the generalizability of the risk adjustment models by use of split sample and a comparison group. Predicator variables such as demographic and diagnostic characteristics of clients and their prior utilization of state hospitals and community programs will be extracted from the state information system and clinical records. Subsequent client utilization of mental health services will be tracked through the state information system and clinical records. Subsequent client utilization of mental health services will be tracked through the state information system and community and hospital records. Costs of services will be found by analysis of agency budgets and by tracking individual staff services. These costs will be regressed on the predictor variables. This project will be conducted under the auspices of Oregon's newly established Center for Research on the Organization and financing of Care for the Severely Mentally ill the Western Mental Health Research Center.